Holding Pattern: July Class 8 Truck Orders Hide Underlying Demand

Class 8 truck orders in July significantly trailed demand for new equipment because manufacturers beset by supply shortages cannot build enough trucks.

Preliminary North America net orders in July were 25,800 units, unchanged from the  25,809 orders booked in June, according to ACT Research.

"In 2018, there was an explosion of orders across the industry, as dealers raced to get their places in rapidly growing out-year backlog queues," said Kenny Vieth, ACT president and senior analyst.

Current demand, he said, is even higher than the summer months three years ago when orders surpassed 50,000 units in consecutive months. 

Selling Out 2022 Capacity

Gross domestic product growth exceeding 6%, capacity constraints across multiple shipping modes, and near-record trucking freight rates are resulting in huge carrier profits. The shortage of new equipment has trickled down to the used market where prices are as much as 60% above a year ago for late-model, lower-mileage trucks.

"While conditions are in place to sell out 2022 backlogs in a very short time horizon, the industry appears to be approaching order distribution much differently this year," Vieth said.

Manufacturers like Peterbilt and Kenworth parent PACCAR Inc. are sold out for 2021 and having conversations with key customers about what they can reasonably expect for production in 2022, PACCAR CEO Preston Feight said on the company's July 27 earnings call.

Microchips Remain A Major Issue

An undersupply of semiconductor chips led to holding 6,500 trucks for completion when parts become available, he said.

"We have about 1.6 months of inventory at the dealers," Feight said. "And I think the industry is 1.9 or 2 [months of inventory], so that bodes well for a strong extended demand cycle."

Even startup Nikola Corp., which is validating early builds of its battery-electric Class 8 cabover Tre model, is impacted by microchip-related shortages.

"There's lots of shortages to go around right now," Nikola CEO Mark Russell said Tuesday on the company's Q2 earnings call. "This is the worst I've seen in my career over three decades now."

Daimler Truck and Volvo Group both indicated more semiconductor-related shortages could lead to downtime in the second half of the year like they experienced in the first half.

"With this great demand, great market, customers are looking for trucks as quickly as they can get them. And we're building as quickly as we can get them," Feight said.

Related articles:

Sold out: PACCAR done taking orders for 2021 amid swelling demand

New Class 8 orders take a June vacation but still robust

Good stuff gone: Older trucks show up in June auctions

Click for more FreightWaves articles by Alan Adler.

Image by Renee Gaudet from Pixabay